Operators in the earnings-related pension system
Authorized pension providers are the pivotal operators in the earnings-related pension system and are responsible for implementing statutory earnings-related pension provision. They manage earnings-related pension insurance policies and invest the assets accumulated to pay for future pensions. Apart from the authorized pension providers, the earnings-related pension system has several other operators, each with its own designated task.
Content of this page
This page gives a brief description of each operator’s role in the earnings-related pension system.
TELA is also a player in the earnings-related pension system and looks after the interests of the earnings-related pension sector. The page Purpose of our activities contains more detailed information about our operations.
Earnings-related pension providers
Practical implementation of earnings-related pension provision rests with the authorized pension providers. They collect insurance premiums and information about employees and self-employed persons, grant pensions and pay them.
Because of its funds, the earnings-related pension sector is also a considerable investor and an important player in the financial sector. This role is regulated. The pension assets are meant to be used for statutory earnings-related pensions. They must therefore be invested profitably and securely. In practice, this means that investments are diversified in various ways. More information on this topic is available on our page Regulation of investment activities.
The implementation of earnings-related pension provision is decentralized. In private sectors, earnings-related pensions are provided by pension insurance companies, company pension funds and industry-wide pension funds, which are governed by private law. Seafarers and farmers have their own separate pension insurers.
Private-sector operators compete against each other. The competition focuses on operational efficiency and services as well as on investment returns. Insurance premiums and pension benefits are determined on administrative grounds and cannot be subject to competition.
In the public sector, Keva manages the earnings-related pensions paid by municipalities, the State and the Evangelical Lutheran Church. In addition, Keva is responsible for the implementation of pension provision for the employees of the Social Insurance Institution (Kela) and Bank of Finland. However, Keva’s role varies when it comes to the funding of pensions: Keva is only responsible for financing the pensions of personnel in the municipal sector. The State Pension Fund, the Church Pension Fund, Kela, and the Bank of Finland are each responsible for financing the earnings-related pensions of their own employees.
The various pension providers are described in more detail on our page Different types of pension providers.
Cooperation among the various actors is seamless. An indication of this is that the person applying for a pension only needs to submit one application to the pension insurer that has had the main responsibility for insuring the applicant’s earnings towards the end of the career. This insurer collects the information needed for granting the pension from any other pension insurers that there may have been. In other words, the individual applicant does not need to contact various bodies to determine the pension accrued.
Finnish Centre for Pensions
The Finnish Centre for Pensions is a statutory cooperation body for developing and implementing the earnings-related pension provision. Its role and functions are laid down by law.
The functions of the Finnish Centre for Pensions include:
- producing research, statistics and background information for the evaluation and development of earnings-related pensions and the monitoring of reforms;
- supporting law drafting relating to earnings-related pensions;
- producing and managing services relating to the implementation of pensions, such as data logistics, division of costs and actuarial services;
- producing training, communication and guidance services relating to earnings-related pensions;
- producing legal, international and supervisory services relating to earnings-related pensions; and
- acting as the liaison body in international earnings-related pension matters and as the agency transmitting pension applications of Finnish residents who apply for a pension from abroad.
The tasks of the Finnish Centre for Pensions also include the supervision of earnings-related pension insurance and the provision of guidance and interpretation rules for pension insurers.
In addition, the Finnish Centre for Pensions serves as a key registrar in the earnings-related pension sector. Almost all pension providers in the private and public sectors maintain pension accrual data in the earnings-related pension sector’s joint earnings and accrual register.
More information on the role of the Finnish Centre for Pensions in the earnings-related pension system is available on the Centre’s website.
Central labour market organizations
Finnish earnings-related pensions are mainly covered by insurance premiums collected from employers and employees. The financiers of earnings-related pensions play also a central role in the development of the earnings-related pension system. Employers and employees are represented by the central labour market organizations.
The contents and financing of earnings-related pension provision have been developed in negotiations among the social partners for as long as the system has existed. The government also participates in the negotiations (see Ministry of Social Affairs and Health). This method is known as tripartite preparation.
Ministry of Social Affairs and Health
The Ministry of Social Affairs and Health is responsible for the development and preparation of pension legislation. The Ministry cooperates closely with the labour market organizations, i.e. the central employer and employee organizations. This tripartite preparation in earnings-related pension issues is based on the fact that earnings-related pensions are covered by pension contributions collected from both employers and employees.
The Ministry also processes applications for the licensing of pension insurance companies, ratifies the actuarial principles applied to pension contributions in private sectors, and confirms the indices associated with earnings-related pension provision.
Parliament of Finland
As with all legislative proposals, Acts associated with the earnings-related pension system are approved by Parliament. Legislative proposals pertaining to the earnings-related pension sector are most often debated in the Social Affairs and Health Committee of Parliament, but depending on the subject, also in other relevant committees. Committees usually consult experts representing both labour market organizations and pension insurers. In these committee hearings, pension insurers are most often represented by TELA.
Financial Supervisory Authority
Operating in connection with the Bank of Finland, the Financial Supervisory Authority (FIN-FSA) is responsible, among other things, for supervising the operations of pension providers in private sectors. For instance, FIN-FSA supervises pension insurance companies, industry-wide pension funds and company pension funds, the Farmers’ Social Insurance Institution and the Seafarers’ Pension Fund.
FIN-FSA’s supervision encompasses the finances, solvency, governance and procedures of the pension providers.
FIN-FSA also confirms the rules of industry-wide pension funds and company pension funds, including their amendments, and maintains the register of industry-wide pension funds and company pension funds. Additionally, FIN-FSA has its own collection of regulations and guidelines for pension insurers.
With regard to public-sector pension insurers, FIN-FSA supervises the planning of Keva’s financial activities and the investment of its assets, as well as the investment activities of the State Pension Fund and the Church Pension Fund.